JPMorgan US Smaller Cos Investment Trust PLC on Friday said it failed to beat its benchmark in the first half but maintained a positive outlook for smaller US companies.
The trust focuses on capital growth from investments in smaller US companies with a sustainable competitive advantage.
Net asset value per share stood at 439.9 pence on June 30, up 0.3% from 438.6p on December 31.
The trust’s return on net assets for the period was 1.0%, underperforming the benchmark Russell 2000 Index which returned 2.5%.
Stock selection was the primary driver of underperformance. The trust said its lack of exposure to artificial intelligence and cryptocurrency related companies accounted for the bulk of underperformance with Super Micro Computers Inc standing out as the largest detractor.
Additionally, in the industrial sector, exposure to WillScot Mobile Mini Holdings Corp ‘proved lacklustre’.
Chair Dominic Neary said: ‘The discrepancy between the return on net assets and the share price total return was due to a widening of the share price discount to net asset value, from 7.9% at the end of 2023 to 11.1% on 30th June 2024.’
JPMorgan US Smaller repurchased 2.0 million shares into treasury at a weighted average discount of 11.4% during the period and has since bought back an additional 100,000 shares.
The investment managers said: ‘The performance of the US economy is crucial for smaller companies, as they tend to generate more of their earnings domestically than larger cap companies...Despite some recent slowing in growth and a weakening in labour market conditions, we expect the economy to remain in good shape, supported by eventual rate cuts and ongoing strong consumer demand.
‘Furthermore, small cap valuations are currently at historic lows relative to large caps, and institutional investors remain under allocated, so any improvement in sentiment towards this sector may encourage institutional investors to increase their exposure. In all, we see several reasons to be optimistic about the outlook for US small caps.’
The trust did however note the potential risks stemming from the upcoming US presidential election and the impact it will have on market volatility.
JPMorgan US Smaller shares were up 0.1% at 424.38p each in London on Friday afternoon.
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